Waiting on Stimulus Common Stocks Don’t Know What to Do

Almost without doubt equity markets are waiting on stimulus from congress. Like a junky looking for their next ‘fix’ this market is built on the Fed printing press and the big spenders in the government. Actually after all the months of crazy large gains in common shares it is nice to see a little reality come into the picture.

Income investors aren’t seeing many bargains in issues above average quality. The average $25/share preferred or baby bond is off just 1.3% this week–and given the level income issues have been trading at most are still at sky high levels—although given the other options available it is understood. Watching the utility issues, where I would like to buy, we have seen a 1% drop in values–still presenting a pretty lousy yield to call picture, but maybe that is simply the way it will be in the future. A number of commenters have noted the low coupons that are being garnered in the bond market–30 year notes down in the 2.5-3% area–why issue high coupon preferreds?

The big losers this week are some of the ‘junky’ issues–i.e. Hersha Hospitality (HT) preferreds, which are trading with suspended dividends. Each of their issues (3 of them) are off $1/share. Honestly the junky issues are just getting ‘put in their place’–trading down where they should be given the high risk they present.

I remain in the 70% area and continue to look for bargains–although I may be looking for a long time. We’ll see if congress rides in on their white horse to save the day—if not bargains may yet appear.

12 thoughts on “Waiting on Stimulus Common Stocks Don’t Know What to Do”

  1. I think regardless of who wins the election in November its a lose/lose for America. I feel like I’m watching the Fall of the Roman Empire Part 2.
    There is no doubt in my mind that the Barbarians have already breached the gates.
    And all the talk about global deleveraging and the “strong US consumer” turned out to be just that….talk.
    I hate to say it but nothing feels safe to me. I continue to invest and buy the best quality Corporate Bond ETFs and Preferreds I can and am willing to except lower yields for capital preservation. But when the next Black Swan event hits, I already know, I’ll only have myself to blame.

    1. Amen: Richard Us $26 trillion in debt, 10 year treasuries @.66% the markets and the public screaming for more stimulus to keep this “FIAT” economy going and the printing presses keep the helicopter money flowing. who’s gonna play the “Tab”? Coming taxes, regulations,”riots, and pandemics”. I was a young man in the 60’s thru the 80’s and thought we were in trouble then, Hell, Those were the good old days.

      1. Yeah, Mike & Richard. People have been screaming about the National Debt for my entire life. Mostly when they don’t like what the money’s being spent on. lol Now the debt’s never been higher in actual money. And “Meh,” say the QE & MMT folks. Given our history, who can blame them?

        And! My taxes are lower and my income is higher than at any time in my life. So there’s that, too. I’ll take it, thank you very much.

        I predict we will never pay off the debt. Never. Not in my lifetime nor anyone else’s in this forum or anywhere else. Some things never change.

        So I will just keep trying to keep my income safe and growing until all my worries are over.

        JMO

  2. Tim …..on your Master Preferred list there are plenty of A and B rated.. under $24.85 for now…

  3. Well Tim,
    Put a bid in on some CTZ went at low as 24.85 yesterday and as good a place to park some money as any. I would guess it has a few quarters left before it all gets called.

    1. I think it gets called in 2-6 months. I had a very substantial position in it but swapped most of it into CTBB yesterday for 5-10 cents more because it has 1 year of call protection.

  4. At least one big investment bank (Goldman Sachs) doesn’t believe another round of economic stimulus is coming in 2020 and has cut their Q4 GDP estimates by 50%. Barring a revolt by the rank and file moderates in Congress against their leadership, this might be the correct forecast.

  5. Tim and all:
    I think that the day to day ‘reasons’ for the stock market volatility are just that, ‘reasons’ . There are two events that underlie investors’ thoughts and actions; they are the upcoming election and a Covid-19 vaccine that works. We are looking at two different Worlds, depending on who wins the election and whether/ when a vaccine is available for widespread use. Everything investable will change based on the outcome of these two events.
    Others may disagree, of course.
    Thanks, howard

  6. Tim, I’m looking for a bounce at SPX 3170 – 3140 area. How the bounce goes will determine if we get a lower low. Of course the election will too. A measured move in the VIX should take it to the 40’s so that gives me pause. There are some big discount in CEF’S that look interesting. ATB

      1. Gary, those were fib retracement levels from ATH. and a measured move from recent peak. Futures were lower than cash in extended hours but never reached those levels. So now we are in the bounce and if we stay below 3443 we should get a lower low in a ABC pattern. A down, which we just experienced from ATH. B up in this bounce and then C lower exceeding A low. The good thing is this is just a correction and not the start of a bear market. How do I know? Because of the pattern in which we pulled back. The fib projections in the pattern I’m following takes us to 4000+ over the next 2 years. I think it will be similar to 1999 in a blow off top and could extend way beyond 4000. What comes after that may feel like 1930. Buckle up!!!

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